1. Unemployment and Declining Public Purchasing Power

Layoffs are a major factor driving unemployment and contributing to a decline in purchasing power. According to Budiono (2024), unemployment among educated individuals is increasing due to higher job expectations and the impact of automation in industry. This decline in purchasing power has a direct impact on economic growth, as seen in Bogor Regency during the Covid-19 pandemic, where economic growth contracted due to high unemployment (Wijayanti, 2022).

Furthermore, the long-term impact of unemployment also includes a decrease in state tax revenue, which can worsen the national economic situation (Salamah & Furqon, 2020). However, fiscal policies such as tax incentives and wage subsidies have been shown to help maintain people's purchasing power during economic crises (Sulastri & Kholis, 2022).

2. Domino Effect on Businesses and MSMEs

MSMEs are the sector most impacted when people's purchasing power declines due to layoffs. According to Sukmawardhana et al. (2023), many micro-businesses experienced a drastic drop in income during the pandemic, leading to an increase in the number of informal workers. In such circumstances, government support is crucial. Good regional financial performance can help provide economic empowerment programs for MSMEs (Kumpangpune et al., 2019).

Furthermore, technology adoption is also key for MSMEs to survive. Research shows that the use of digital platforms can help increase MSME competitiveness and revenue, even during a crisis (Hartini et al., 2023). Therefore, a digitalization strategy is a crucial step for businesses to address the challenges posed by declining purchasing power.

3. Changes in Work Trends and Company Adaptation

Facing global economic challenges, companies are forced to adapt to changing work trends and business strategies. Digital transformation is a key solution for increasing efficiency and reducing reliance on human labor (Setyahuni et al., 2024). However, its impact on the workforce cannot be ignored, particularly in the form of work stress resulting from changes in organizational culture (Winasis, 2020).

Furthermore, companies that are able to develop the skills of their workforce will have an advantage in facing increasingly dynamic business challenges (Herlina et al., 2022). Therefore, human resource training and innovation in digital marketing are crucial strategies for sustaining business amidst changing consumer consumption patterns (Dewi & Setiawan, 2023).

4. The Role of Government in Addressing the Impact of Layoffs

The government plays a crucial role in mitigating the negative impacts of layoffs through various economic and social policies. One measure that has been implemented is providing social assistance to affected communities, which has been proven to help reduce their economic burden (Nurhayati et al., 2021). However, challenges in distributing aid often arise from a lack of accurate data on beneficiaries.

In addition to social assistance, empowering MSMEs is also an effective solution to reduce unemployment. Government-facilitated training and skills development programs can help small and medium-sized enterprises (SMEs) adapt to market changes (Febriyantoro et al., 2019). Research also shows that government policies supporting MSMEs have a positive impact on local economic growth (Kusuma et al., 2022). Therefore, collaboration between the government, the private sector, and the community is key to creating jobs and improving economic well-being.

Layoffs have a broad impact on the economy and public consumption, ranging from increased unemployment to decreased purchasing power, which impacts businesses and MSMEs. However, with appropriate policies, such as tax incentives, digital transformation, and economic empowerment programs, the negative impact of layoffs can be minimized. Therefore, collaboration between the government, companies, and the community is essential to creating a more stable and sustainable economic ecosystem.

SOURCE: STATE UNIVERSITY OF SURABAYA

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